A recovery from a midday sell-off saved the Dow industrials’ record of “more-than-a-five-month streak” (The Wall Street Journal) without a drop of three consecutive sessions. The sell-off appeared to be due to a sharp drop in the U.S. dollar versus the yen, falling 2.1% by the close.
It was a wild day of trading with the Dow recovering 196 points from its low. The rally was led by defensive sectors: Health care, utilities and telecommunication services all gained more than 1%. The iShares Nasdaq Biotechnology (IBB) rose 2.9%, and the financial sector also did well, up 1.4%.
Initial jobless claims fell for the week ending June 1, reporting a number that was slightly lower than anticipated.
At Thursday’s close, the Dow Jones Industrial Average was up 80 points at 15,041, the S&P 500 gained 14 points at 1,623, and the Nasdaq rose 23 points to 3,424. The NYSE traded 799 million shares and the Nasdaq crossed 466 million. Advancers were ahead of decliners on the Big Board by 3-to-1 and on the Nasdaq by 2.4-to-1.
After rising to the second highest intraday reading of the year, the CBOE Volatility Index (VIX) closed on the low of the day — a very bullish indication that the market has held at an important support zone.
Thursday’s dramatic reversal, from what looked like a crushing blow to the bulls at noon, is strong evidence that the market has successfully tested its immediate key support zone.
Note the strong buy signal from our proprietary indicator, the Collins-Bollinger Reversal (CBR) as prices jumped above the 50-day moving average. The extremely oversold MACD supports the notion that this was no one-day fluke and that buyers stand ready to commit at the 1,600 level of the S&P 500.
And each of the various key indices look much like the S&P 500′s chart, showing CBR buy signals as each popped from a key support area. The Nasdaq reversed from its 3,400 line, and the Dow industrials reversed from below the 50-day moving average and the psychologically important line at 15,000.
Conclusion: Thursday’s buying was no mistake — institutional buyers had determined in advance that the key support zones noted above were where they would take a bullish stand. Now if the jobs numbers support this trading action, the market should be able to maintain Thursday’s lows throughout the summer.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.